Question
here Taking flotation costs into account will reduce the cost of new common stock. @ True: Taking flotation costs into account will reduce the cost
here
Taking flotation costs into account will reduce the cost of new common stock. @ True: Taking flotation costs into account will reduce the cost of new common stock, because you will multiply the cost of new common stock by 1 minus the flotation cost similar to how the after-tax cost of debt is calculated. o False: Flotation costs are additional costs associated with raising new common stock. Sunny Day Manufacturing Company is considering investing in a one-year project that requires an initial investment of $500,000. To do so, it will have to issue new common stock and will incur a flotation cost of 2.00%. At the end of the year, the project is expected to produce a cash inflow of $595,000. The rate of return that Sunny Day expects to earn on its project (net of its flotation costs) is places). v (rounded to two decimal White Lion Homebuilders has a current stock price of $22.35 per share, and is expected to pay a per-share dividend of $2.03 at the end of the year. The company's earnings' and dividends' growth rate are expected to grow at the constant rate of 9.40% into the foreseeable future. If White Lion expects to incur flotation costs of 5.00% of the value of its newly raised equity funds, then the flotation-adjusted (net) cost of its new common stock (rounded to two decimal places) should be Sunny Day Manufacturing Company Co.'s addition to earnings for this year is expected to be $420,000. Its target capital structure consists of 35% debt, 5% preferred, and 60% equity. Determine Sunny Day Manufacturing Company's retained earnings breakpoint: O O O $630,000 $805,000 $700,000
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